Health insurers cut back on networks

In the midst of all the turmoil in health care these days, one thing is becoming clear: No matter what kind of health plan consumers choose, they will find fewer doctors and hospitals in their network — or pay much more for the privilege of going to any provider they want.

These narrow networks, featuring limited groups of providers, have made a big entrance on the newly created state insurance exchanges, where they are a common feature in many of the plans. While the sizes of the networks vary considerably, many plans now exclude at least some large hospitals or doctors’ groups. Smaller networks are also becoming more common in health care coverage offered by employers and in private Medicare Advantage plans.

Insurers, ranging from national behemoths such as WellPoint, UnitedHealth and Aetna to much smaller local carriers, are fully embracing the idea, saying narrower networks are essential to controlling costs and managing care. Major players contend they can avoid the uproar that crippled a similar push in the 1990s.

“We have to break people away from the choice habit that everyone has,” said Marcus Merz, chief executive of PreferredOne, an insurer in Golden Valley, Minn., that is owned by two health systems and a physician group. “We’re all trying to break away from this fixation on open access and broad networks.”

But while there is evidence that consumers are willing to sacrifice some choice in favor of lower prices, many critics, including political opponents of the new health care law, remain wary about narrowing networks.

A concern is that insurers will limit access to specialists or certain hospitals. “Too often, Obamacare cancels the policy you wanted to keep and tells you what policy to buy,” Sen. Lamar Alexander, R-Tenn., said in a speech in April.

In response, state and federal regulators say they are more closely monitoring the plans being offered in the coming year to be sure they are clear and that consumers have sufficient access to hospitals and doctors. In some cases, they are already insisting on changes.

Nonetheless, for people who are directly picking plans in the open markets, insurers say price is turning out to be critical. People “are weighing affordability and breadth of network,” said Karen Ignagni, chief executive of America’s Health Insurance Plans, an industry trade group. “What we’re finding is individuals are experiencing a preference for affordability,” she said.

Minnesota would seem to be a case in point.

On the state exchange, PreferredOne offered an inexpensive plan with a network of 13 hospitals, but those low premiums helped the insurer grab 60 percent of the individual insurance market.

While many insurers are including only those hospitals and doctors willing to charge lower prices, experts say the makeup of the networks is likely to evolve over time, focusing less directly on price and more on the ability of providers to deliver coordinated and high-quality care.

Although a similar attempt to restrict choice failed in the early ‘90s, after opposition to HMOs and managed care, insurers insist these efforts will not run into the same resistance because they are now working more closely with providers, and customers are more concerned about costs.

“It’s a new era,” said Dr. Sam Ho, the chief medical officer for United Healthcare.

Outside the exchanges, insurers are also promoting smaller networks for employers as a way to reduce overall health care costs, said Larry Boress, chief executive of the Midwest Business Group on Health. “The larger the network is, the higher the cost,” he said.

Employers remain concerned about the quality of the networks, Boress said, and many are doing an analysis to see how disruptive changing the network would be for their workers.

Nonetheless, the bottom line is that more employers are considering smaller networks. Many, like Wal-Mart and General Electric, have gone so far as to steer employees to specific hospitals for certain expensive procedures like joint replacements.

In 2010, 24 percent of the largest employers offered smaller networks, chosen for their low costs or quality. Last year, 27 percent offered them and 44 percent said they were considering them, according to Mercer, a benefits consulting firm. Some companies are experimenting with different tiers of networks, charging workers more if they go to the broadest network, said Joseph Kra, a Mercer consultant.

There has been pushback, however. When United Healthcare reduced the size of networks in some Medicare Advantage plans, consumer groups and regulators balked. Ho, the chief medical officer, said the insurer offered patients the opportunity to continue receiving certain treatments, like chemotherapy, with their existing provider.

Medicare recently announced it would require Advantage plans to give advance notice of any significant changes to a network and might allow beneficiaries to switch during the year if the network underwent too much change after they had already signed up. Federal officials, who had floated the idea of requiring exchange plans to submit their networks for review, said they would instead focus on specific types of doctors, like cancer specialists, to make sure people have adequate access to care.

“We intend to continue monitoring plans,” a Medicare spokeswoman said in a statement, “and learn from that review, to determine if further rules are needed in the coming years to ensure that Marketplace plans offer quality networks to consumers.”

State regulators are also contemplating action. In Washington state, Mike Kreidler, the insurance regulator, issued new rules last month that set certain minimum standards for access to a doctor and require insurers to make clear who is in the network.

“I want to make sure carriers are not in a race to the bottom,” he said.